Eurozone Crisis: Sarkozy And Merkel Hold Crunch Talks Ahead Of Summit

The leaders of France and Germany will hold crunch talks in Paris amid frantic efforts to agree a deal to stabilise the eurozone.

President Nicolas Sarkozy and Chancellor Angela Merkel are to discuss details of moves towards closer fiscal integration of the single currency area.

One of the main sticking points is thought to be how to punish states who fail to abide by strict budgetary rules.

Britain's Deputy Prime Minister Nick Clegg on Sunday delivered a stark warning that the eurozone was skating on "very thin ice", suggesting the "whole edifice" could collapse. He said failure to strike at least an outline deal for reforms at an EU summit on Friday would be "extraordinarily grave".

The Liberal Democrat leader said: "Perhaps not every T crossed and every I dotted, but we need to have a clear roadmap towards the stabilisation, strengthening of the eurozone."

He added: "I think there is no doubt in my view that the whole edifice upon which the eurozone is based is now skating on very thin ice indeed. Obviously, we must protect British interests... but any reasonable person must wish the French and Germans and others the best of luck in sorting this out."

However, he insisted that the fundamental reforms needed would apply to the 17 member states rather than the full EU - and a referendum would not be needed in Britain.

"I don't think there needs to be a referendum on Europe," Mr Clegg said. "The referendum will only take place if there was an additional surrender of sovereignty from us to the European Union. The test which we have legislated on is if we, the UK, give up more sovereignty in a significant way to the EU."

Mr Clegg's comments contrasted sharply with those from Work and Pensions Secretary Iain Duncan Smith. The eurosceptic appeared to align himself with many on the Tory right by suggesting that the impact from any treaty change would demand a national vote.

"The Prime Minister has always been clear, if there are substantial changes that affect Britain's position, then he would go for a referendum because that's what we said to the British public we would do," he said.